Alibaba has announced that it's splitting into six independent units.
👉 Background: Alibaba was founded in 1999 in China as an online marketplace that connected Chinese manufacturers with buyers worldwide. Over time, Alibaba became a $328 billion powerhouse that could potentially threaten the power of the government.
👉 What happened: Now, Alibaba has announced a major overhaul of its business by splitting into six independent units. Each unit will raise its own capital and explore its own IPOs down the track.
👉 What else: This could be a winning move for the valuations of the six entities as well as Alibaba’s relations with the Chinese government.
💡 While restructuring can give each independent company more flexibility, it means less power for the overall company. And this is exactly what the Chinese government wants.
💡Over the last couple of years, Alibaba’s founder, Jack Ma, has had a pretty rocky relationship with the Chinese government and then he disappeared from public view for many many months... But now, he’s returned to China with six smaller companies instead of one big behemoth.
💡This may become a playbook for other Chinese tech giants like Tencent if they want to stay on the good side of the government.
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